Chip Layoffs Send Workers Home for the Holidays

In a sign of the chip sector's straitened circumstances, a handful of companies announced layoffs the week before Christmas.

ON Semiconductor ( ONNN) said Friday that it will shrink its payroll by about 4% or 300 jobs over the next year, partly through attrition. The move is intended to make the company profitable a year from now, in the fourth quarter of 2003. ON has seen its revenue plunge in half from 2000, with sales expected to total $1 billion this year.

Because of severance payouts and other restructuring costs, ON will take charges of $18 million to $22 million in the current quarter.

For the quarter now under way, the company said Friday morning that turns (business orders placed and shipped within the quarter) have been better than expected. Though it still expects sales to fall, the decline should be towards the high end of prior guidance for a 3% to 5% decline. ON said revenue should beat consensus estimates for $261 million.

Shares finished down 4 cents, or 2.5%, to $1.56.

On the chip-equipment side, too, layoffs are taking a toll. After two years running of catastrophic revenue drops -- with sales down 41% in 2001 and expected to fall another 32% this year -- the equipment industry still isn't expected to see much of a lift in 2003 .

Last Wednesday, equipment maker KLAC-Tencor ( KLAC) confirmed that it had let go about 5% of its 5,500 employees, or around 275 people.

In October, KLA's revenue guidance for the current quarter fell well below Wall Street's expectations, though its outlook for flat bookings was better than some of its peers'.

Also last week, Dutch-based equipment outfit ASML ( ASML) said it will lay off about 22% of its staff, or 1,450 employees worldwide, aiming to be cash flow neutral for the second half of 2002. As part of that reduction, it will shutter an operation in San Jose, Calif., that employs 300 people.

In a statement explaining the decision, CEO Doug Dunn pointed out that the market for semiconductor capital equipment has slumped more than 70% in the past two years.

Finally, in a piece of belated news, a Securities and Exchange Commission filing from Apple ( AAPL) showed it decided to eliminate 180 employees in the fall, with most job cuts having taken place in the September quarter. The majority of layoffs were in corporate operations, sales and R&D at PowerSchool, an educational software outfit Apple acquired last year.